Recent thoughts

Apple fails to take bite out of Amazon

Regular readers may recall my December blog which reported that the US Department of Justice had accused Apple of colluding over ebook prices.

Well, the verdict is out: Apple have been found guilty. The ruling said that the company played a "central role" in a conspiracy with some of the biggest book publishers in the US to fix prices in violation of antitrust law.

Apple deny any wrongdoing and plan to appeal, but the case seems pretty clear cut: The publishers implicated – Hachette Book Group Inc, Macmillan, HarperCollins Publishers LLC, Penguin Group and Simon & Schuster – settled with the US Department of Justice before the trial.

So what were they all up to?

In a nutshell, they wanted to pull prices up. Amazon's low cost-base was squeezing them. They wanted to eliminate price competition and so neutralise one of Amazon's key strengths. So they agreed to raise their e-book prices above the prevailing $9.99 price tag. Apple also agreed with the publishers to launch its iBookstore at the 2010 iPad launch – to break Amazon's "monopolistic grip on the publishing industry" – but only if these assurances over profitability were given.

There are a couple of things which strike me about this story. Firstly, it is another example of traditional publishers failing to keep up with the digital revolution. Amazon are fairly ruthless – they have as The Economist reports "long spurned profits in favour of growth" – but colluding to short change customers reflects badly on the publishers. And for Apple to be the ringmaster was a risky move for a company with so much invested in its brand capital.

The second thing is the price they are arguing over: $9.99 to transfer a file just seems too high to me. For those in the UK we're talking around £6.60. I have mentioned before how disproportionate this pricing structure seems to me. I believe an ebook should cost – at most – half what a paperback does. Publishers (and let's not forget the authors) have to make a profit, but let's not shaft the consumer in the process.